Grain Market Update – June 19

What a Bizarre Spring!  The Abnormally Wet Weather Is Causing Problems In All Areas Of The Corn Belt.

The spring will go down as one of the wettest, if not the wettest, in history.  And not just for this area, but for the entire Corn Belt.  We have never witnessed a spring that has been so wet and has caused so many problems with getting our corn and bean crops planted.  Many local areas in Wisconsin, Indiana, and Ohio have been able to only plant 50-60% of their originally intended corn acres, and now the clock is running out on beans as well.  Many, many acres of corn and beans will go unplanted this year.  Some estimates have between 10 – 15 Million acres of corn and beans that won’t be planted, and if the farmer has Prevent Plant Insurance, these acres won’t be planted at all.  If a farmer does not have insurance, then he is continually struggling to get something planted to save his farm.  Corn planted today won’t yield much grain, but it can work for silage, and if you are a dairy farmer, this will be its intended use.  It is entirely too late now to plant corn for grain production as the crop will run into an early freeze, not to mention it will be very wet and suffer from poor test weights and higher FM levels.  Beans planted today could still work, but the window is slamming shut rather quickly.  And as I look at the forecast, the 6-10 day maps continue to look very wet for this area.  Not to mention that the crops that are planted are having a hard time emerging because we are lacking sunshine and heat to rapidly grow the crop.

The market is continuing to have a very difficult time getting its arms around the final planted corn and bean acres this spring, as well as the yield potential for this crop.  With the planting conditions being much below par and everything being at least 3 weeks later than a normal crop, there will be a yield lag that is quite noticeable this fall.  Without boring you with a detailed S & D analysis, my best guess is that corn ending stocks for this fall could easily drop down to 1.2 B bu and if we have a dry summer, it could drop as severely as 800 M bu.  If this happens, this will cause corn to remain very firm, much firmer than it already is.  Much of the corn carry on the CBOT will vanish, as it already has, and basis will firm dramatically.  On beans, the current estimate on bean carryout for this fall is just over 1 B bu.  If the weather does not cooperate, this could very likely be the biggest carryout estimate of the year.  Add to this a new Chinese agreement, and then the bean market could be off to the races because bean exports will all of a sudden grow instantly to China.  Similar to corn, bean carries are about half of what they were just 2 weeks ago, and bean basis is firming as well.

Just like you, the market is very stressed out about not having a clear picture on acres and yields.  It could be months before we have any accurate idea on what this crop will or will not produce.  In the mean-time, the market will gyrate like we have not seen since 2012.  The downside potential for corn and beans is limited, and any surprise in poor weather or a new Chinese agreement will just fuel us to a bullish story.  The corn market is not done rallying yet, and the bean market is very concerned about getting its last few acres planted while still in June.  We have seen the market correct a bit over the last day or so, but this is needed for a healthy bull market.  Corn and beans suffer from a lack of planted acreage and the late timing of the planted crop, and wheat is suffering from excess spring rains which will hurt quality.  None of this is bearish.  I expect that all grains will advance another leg higher once this small correction runs its course.

There are some producers who were very fortunate and were able to get most of their corn and beans planted.  If you are one of these folks, consider yourself lucky, and now you have a very favorable market to price your crop.  Dec ’19 corn futures are currently trading at $4.59  I believe we will have a shot to trade Dec corn up to the $5.00 level in the next few weeks, especially if we have a problem with the weather.  On beans, its anyone’s guess.  If the weather turns dry and we get a new Chinese deal, this market could turn from a sleeping bull to an enraged bull overnight.  The other factor is the actual acres planted, and how NASS is quantifying these acres each week.  Are the acres being planted or are they going to Prevent Plant and no longer being intended to be planted?  And if no longer intended to be planted, NASS is considering these acres planted whether they are actually planted or not.  This is all adding to the market’s confusion and frustration over the amount of planted acres.  This will likely add to the bullish sentiment as we move forward.

For livestock producers, this is going to cause you to pay more for corn in the coming year.  I wish I had better news, but your cost of corn will likely get rather expensive for the next year.  The lack of a planted corn crop locally has caused both futures and basis to firm in dramatic fashion, and frankly, I don’t see it backing off in material quantity until well after harvest.  Local basis has firmed over the last month, and this won’t change much either.  People who need to buy corn will likely need to pay at least option (zero basis under the Chicago futures level) or more to secure corn, if one can even find a source to sell corn to you.  Thus, for all of the above reasons, the corn basis has rallied firmer over the last month and will likely continue to do so.  New crop corn basis has firmed as well, and it will likely remain firmer than normal until past harvest.  I also expect the bean basis to firm as well.  Last harvest bean basis was very cheap due to the huge yields and the lack of Chinese buying.  This year is different, especially if a new Chinese deal is signed.  I don’t see new crop bean basis getting weaker than it is today at 90 cents under November and could firm dramatically if these other factors come into play.  Get your seat belts tightened.  Volatility will ramp up and this will be a wild ride.

New Arrive Delayed Price Rates have Been Reduced

We have reduced our Delayed Price rates for new arrive corn and beans into Readfield and Center Valley.  These rates are for new arrive bushels only, and the rate will be in effect until Oct 1st 2019 when new crop storage rates will go into effect.  The new Delayed Price rate is now FREE until Oct 1st 2019.  After Oct 1st, these bushels will be subject to the new crop storage rates posted at that time and are not known today.

Targets Produce Success and Protection For Your Farm

Weather markets will push the market around like a yoyo and produce unprecedented volatility.  However, volatility can be your friend if you have a solid marketing plan and know how much and at what price you feel comfortable selling when the right opportunities present themselves.  If you are not working with one of our grain originators today, please give us a call.  We will gladly sit down with you to create a plan and help you protect your farm.  For a list of our grain originators and the one closest to you, please click here.  These types of volatile markets are a grain marketer’s dream.  The volatility present selling opportunities that are very short lived.  For the disciplined marketer, who knows exactly what commodity he needs to sell and at what level, this is a perfect scenario.  You simply place target orders in our system and at 3 am in the morning next Thursday while China makes an announcement when we are all sleeping, the markets ramps up, hits your target, locks in your contract price, all automatically while you are in bed.  How fantastic is that!  I encourage all of you to start using our online target system.  Its free, easy, and will protect your farm.  Please click here for more information.

What Are The Charts Telling Us?

Here are the support and resistance levels for cash and new crop grains.  These are all futures levels as traded at Chicago:

Cash Corn – July 19 Corn Futures – Support at $4.38, Resistance at $4.64, Place Targets at $4.60

New Corn – Dec 19 Corn Futures – Support at $4.54, Resistance at $4.73, Place Targets at $4.70

Cash Beans – July 19 Bean Futures – Support at $8.94, Resistance at $9.21, Place Targets at $9.15

New Beans – Nov 19 Bean Futures – Support at $9.21, Resistance at $9.48, Place Targets at $9.40

New Wheat – July 19 Wheat Futures – Support at $5.15, Resistance at $5.49, Place Targets at $5.40

To see where grain futures are currently trading, please click here.

As always, if I can help you with anything, please call me at 419-279-3809 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

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